In this article, we discuss Warren Buffett’s 10 favorite dividend stocks for the rest of 2022.
In one of his interviews with Business Insider, Buffett mentioned that one of the main approaches used by profitable businesses is to initiate a dividend policy to increase shareholder value. He further said that the companies should always be consistent and rational in their dividend policies, as unstable dividends will confuse the shareholders. This is also evident from Buffett’s practical investment approach, as major dividend stocks in his portfolio have been raising dividends for decades. Over the years, his hedge fund has earned billions in dividend payments and the amount is increasing with every passing year. According to a report by CNBC, Berkshire Hathaway’s stake in Apple Inc. (NASDAQ:AAPL) generated an average of $775 million annually in dividends in recent years.
At the end of Q2 2022, Berkshire Hathaway’s 13F portfolio was valued at over $300 billion, down from $363.5 billion in the previous quarter. Technology and finance made up the major portion of the portfolio in Q2. The hedge fund has a total of 47 holdings, with Apple Inc., Bank of America Corporation (NYSE:BAC), and The Coca-Cola Company (NYSE:KO) taking up the first three positions. In addition to these, we will discuss some other favorite dividend stocks of Warren Buffett.
Our Methodology
We selected top dividend stocks from Berkshire Hathaway’s 13f portfolio as of the second quarter of 2022. The stocks are ranked according to their position in the portfolio.
Warren Buffett’s 10 Favorite Dividend Stocks for the Rest of 2022
10. McKesson Corporation (NYSE:MCK)
Berkshire Hathaway’s Stake Value: $1,043,331,000
Dividend Yield as of August 17: 0.58%
McKesson Corporation (NYSE:MCK) is a Texas-based healthcare company that distributes pharmaceuticals, medical supplies, and care management tools. Berkshire Hathaway opened its position in the company in Q1 2022 and raised its stake in the second quarter by 10%. The hedge fund owned over 3 million MCK shares, valued at over $1 billion. The company represented 0.34% of Warren Buffett’s portfolio.
On August 15, McKesson Corporation hit its 52-week high, gaining 50.6% year-to-date while its 12-month returns came in at 84%, as of the close of August 16. The company announced a 15% hike in its quarterly dividend to $0.54 per share in July. This marked the company’s sixth consecutive year of dividend growth. As of August 17, the stock’s dividend yield stood at 0.58%.
Appreciating the company’s strong quarterly earnings and its solid performance in its core businesses, Deutsche Bank lifted its price target on McKesson Corporation in August to $409 and kept a Buy rating on the shares.
At the end of Q1 2022, 59 hedge funds in Insider Monkey’s database owned stakes in McKesson Corporation, up from 57 in the previous quarter. The collective value of these stakes is nearly $3.8 billion.
In addition to famous stocks like Apple Inc., Bank of America Corporation, and The Coca-Cola Company, McKesson Corporation is also one of Warren Buffett’s most prominent holdings.
Baron Funds mentioned McKesson Corporation in its Q2 2022 investor letter. Here is what the firm has to say:
“McKesson Corporation is a leading distributor of pharmaceuticals and medical supplies. The company contributed to performance due to solid financial results and investor rotation into stocks trading at lower valuation multiples of earnings. We continue to believe the stock is inexpensive in light of McKesson’s strong competitive position in growing end-markets and earnings growth potential.”
9. Citigroup Inc. (NYSE:C)
Berkshire Hathaway’s Stake Value: $2,536,616,000
Dividend Yield as of August 17: 3.77%
Citigroup Inc. (NYSE:C) is an American multinational investment bank and financial services company. In July, Oppenheimer raised its price target on the stock to $86 with an Outperform rating on the shares, appreciating the company’s strong balance sheet and its shareholder return.
Warren Buffett started investing in Citigroup Inc. during the first quarter of 2022, purchasing a stake worth nearly $3 billion. In Q2 2022, his hedge fund owned over 55 million shares in the company, with a total value of over $2.5 billion. The company accounted for 0.84% of Warren Buffett’s portfolio.
On July 21, Citigroup Inc. declared a quarterly dividend of $0.51 per share, consistent with its previous dividend. The stock’s dividend yield, as of August 16, came in at 3.77%.
As of the close of Q1 2022, 88 hedge funds in Insider Monkey’s database were bullish on Citigroup Inc. and owned stakes worth over $8 billion. In addition to Berkshire Hathaway, Harris Associates was also one of the company’s most prominent stakeholders in Q1.
Diamond Hill Capital mentioned Citigroup Inc. in its Q1 2022 investor letter. Here is what the firm has to say:
“Shares of Citigroup declined in the quarter as investors became increasingly negative on capital markets activity. The company is also continuing to divest certain consumer banking geographies which may be dilutive to earnings in the near term.”
8. The Bank of New York Mellon Corporation (NYSE:BK)
Berkshire Hathaway’s Stake Value: $3,018,027,000
Dividend Yield as of August 17: 3.29%
The Bank of New York Mellon Corporation (NYSE:BK) is a New York-based investment banking services holding company. The company has been regularly paying dividends for the past 21 years while maintaining an 11-year streak of dividend growth. On July 15, the company announced an 8.8% hike in its quarterly dividend to $0.37 per share. The stock’s dividend yield stood at 3.29%, as of August 17.
The Bank of New York Mellon Corporation has been a part of Berkshire Hathaway’s portfolio since 2010 when the hedge fund purchased a stake worth over $54 million in the company. In Q2 2022, the hedge fund owned over 72.3 million BK shares, valued at over $3 billion. The company represented 1% of Warren Buffett’s portfolio.
In August, Deutsche Bank raised its price target on The Bank of New York Mellon Corporation to $46, expecting a strong rebound in the banking stocks in the second half of the year.
At the end of Q1 2022, 54 hedge funds in Insider Monkey’s database owned stakes in The Bank of New York Mellon Corporation, growing from 49 a quarter earlier. The combined value of these stakes stood at over $4.5 billion.
Ariel Investments mentioned The Bank of New York Mellon Corporation in its Q4 2021 investor letter. Here is what the firm has to say:
“Rising interest rates, after a surprisingly long period of low absolute rates and negative “real” rates, will create a headwind. While there has been much debate about the cause of these low rates, we believe the most important factor has been the $120 billion in monthly federal reserve open market bond purchases and the accumulation of an $8 trillion balance sheet. The former will end, and the latter will shrink. It is not just the Fed that has aggressively purchased bonds, bidding up prices and lowering yields. Bond traders and hedge fund managers have added to positions, confident that being on the same side as the Fed was the wise place to be. Now as the Fed is about to become a seller of bonds rather than a buyer, Wall Street’s “smart money” is likely to follow suit. Against this backdrop, fixed income securities and bond substitutes such as high dividend paying utilities and absolute return hedge funds are substantially overpriced and are not likely to produce attractive returns going forward.
This expectation of a reversion to the mean for interest rates helped 2021 performance, though not as much as we had hoped. The yield on the U.S. 10-year Treasury did indeed increase from +0.92% at the beginning of the year to +1.52% at year-end. An underreported story was the poor performance of bonds last year. The Barclays Aggregate Index declined -1.67% for the year ending December compared to a return of +28.71% for equities as measured by the S&P 500. Interest rates have continued to climb in 2022 with the 10-year Treasury at +1.79% as we go to print. This move higher in rates has contributed to our good, early start to 2022. Smaller positions in The Bank of New York Mellon Corporation (BK) also benefited from higher rates, principally with their ability to invest customer cash.”
7. Occidental Petroleum Corporation (NYSE:OXY)
Berkshire Hathaway’s Stake Value: $9,335,408,000
Dividend Yield as of August 17: 0.82%
Occidental Petroleum Corporation (NYSE:OXY) is a Texas-based chemical industry company that specializes in the exploration of hydrocarbon and manufactures petrochemicals in the US. Berkshire Hathaway first started investing in the company during the third quarter of 2019 and sold off its entire OXY stake during Q2 of 2022. The hedge fund again initiated its position in the company in Q1 2022, and currently owned a stake worth over $9.3 billion. The company represented 3.11% of Warren Buffett’s portfolio.
Occidental Petroleum Corporation currently pays a quarterly dividend of $0.13 per share, raising it by 1200% this February. As of August 17, the stock’s dividend yield stood at 0.82%.
In July, Truist lifted its price target on Occidental Petroleum Corporation to $105 and kept a Buy rating on the shares, appreciating the performance of the energy sector.
The number of hedge funds tracked by Insider Monkey owning stakes in Occidental Petroleum Corporation grew to 67 in Q1 2022, from 58 in the previous quarter. These stakes have a total value of over $12.6 billion. Ken Griffin, Rajiv Jain, and Carl Icahn were some of the company’s most prominent stakeholders in Q1.
6. The Kraft Heinz Company (NASDAQ:KHC)
Berkshire Hathaway’s Stake Value: $12,419,712,000
Dividend Yield as of August 17: 4.12%
An American food corporation, The Kraft Heinz Company (NASDAQ:KHC) is one of the oldest holdings of Berkshire Hathaway as the hedge fund started investing in the company during the third quarter of 2015. In Q2 2022, the fund owned over 325.6 million KHC shares, valued at over $12.4 billion. The company represented 4.13% of Warren Buffett’s portfolio.
The Kraft Heinz Company has been offering dividends to shareholders for a long time, even before the merger of Kraft and Heinz in 2015. Currently, it pays a quarterly dividend of $0.40 per share, with a dividend yield of 4.12%, as of August 17.
In July, Stifel upgraded The Kraft Heinz Company to Buy from Neutral, with a $43 price target. Analysts are also positive about other dividend stocks like Apple Inc., Bank of America Corporation, and The Coca-Cola Company.
At the end of Q1 2022, 35 hedge funds tracked by Insider Monkey owned investments in The Kraft Heinz Company, down from 39 in the previous quarter. The collective value of these investments is over $13.4 billion.
5. American Express Company (NYSE:AXP)
Berkshire Hathaway’s Stake Value: $21,016,276,000
Dividend Yield as of August 17: 1.27%
American Express Company (NYSE:AXP) is a New York-based credit card services company that issues personal, small business, and corporate credit cards. Warren Buffett has been investing in the company for over 25 years and his total unrealized gain on the stock stood at over $26 billion. In Q2 2022, Berkshire Hathaway owned over 151.6 million AXP shares, worth over $21 billion. The company represented 7% of Warren Buffett’s portfolio.
American Express Company holds a very strong dividend history, paying dividends to shareholders consistently for the past 30 years. It currently offers $0.52 per share in the quarterly dividend, with a dividend yield of 1.27%, as of August 17.
American Express Company’s billing activity remained strong in Q2 2022, reaching pre-pandemic levels and its revenue has also shown growth over the years. In view of this, RBC Capital raised its price target on American Express Company in July to $180 with a Sector Perform rating on the shares.
At the end of Q1 2022, 69 hedge funds in Insider Monkey’s database reported owning stakes in American Express Company, up from 64 in the previous quarter. These stakes have a total value of over $33 billion. With nearly $3 billion worth of stakes, Fisher Asset Management was one of the most prominent stakeholders of the credit card company in Q1.
4. Chevron Corporation (NYSE:CVX)
Berkshire Hathaway’s Stake Value: $23,373,304,000
Dividend Yield as of August 17: 3.59%
Berkshire Hathaway initiated its position in Chevron Corporation (NYSE:CVX) during the third quarter of 2020 and has raised its stake significantly since then. In Q2 2022, the hedge fund owned stakes worth over $23.3 billion in the oil company, marking a big jump from its value of $4.5 billion at the end of 2021. The company is the fund’s fourth-largest holding and accounted for 7.78% of Warren Buffett’s portfolio in Q2.
On July 27, Chevron Corporation declared a quarterly dividend of $1.42 per share, in line with its previous dividend. The company has raised its dividends for 35 years in a row. As of August 17, the stock’s dividend yield came in at 3.59%.
In August, Credit Suisse assumed its coverage of Chevron Corporation with an Outperform rating and an unchanged price target of $202.
As shown by Insider Monkey’s data, 53 hedge funds were bullish on Chevron Corporation in Q1 2022, the same as in the previous quarter. The stakes owned by these hedge funds hold a collective value of nearly $28 billion.
Diamond Hill Capital mentioned Chevron Corporation in its Q1 2022 investor letter. Here is what the firm has to say:
“Other top contributors in Q1 included multinational energy company Chevron Corp. (NYSE:CVX). The company benefited from increased energy demand as COVID-related economic restrictions eased in tandem with concerns regarding supply interruptions related to Russia’s invasion of Ukraine.”
The Coca-Cola Company (NYSE:KO)
Berkshire Hathaway’s Stake Value: $25,164,000,000
Dividend Yield as of August 17: 2.71%
Berkshire Hathaway started investing in The Coca-Cola Company in 1988, with shares worth over $1 billion. The hedge fund has reaped massive gains from its position in the beverage company. Moreover, the fund’s dividend payments from the company have grown from $88 million in 1995 to $672 million in 2021. The hedge fund owned 400 million KO shares in Q2 2022, valued at over $25 billion. The Georgia-based company represented 8.38% of Warren Buffett’s portfolio.
The Coca-Cola Company holds one of the longest dividend growth streaks in the US market, raising its dividends consistently for the past 60 years. The company offers a quarterly dividend of $0.44 per share, with a dividend yield of 2.71%, as of August 17.
As of the close of Q1 2022, 64 hedge funds tracked by Insider Monkey owned stakes in The Coca-Cola Company, compared with 70 a quarter earlier. These stakes are collectively valued at over $29 billion. In addition to Warren Buffett, Rajiv Jain and Ray Dalio were also some of the company’s most prominent stakeholders in Q1.
ClearBridge Investments mentioned The Coca-Cola Company in its Q4 2021 investor letter. Here is what the firm had to say:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (Coca-Cola). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
2. Bank of America Corporation (NYSE:BAC)
Berkshire Hathaway’s Stake Value: $31,444,432,000
Dividend Yield as of August 17: 2.43%
Berkshire Hathaway opened its position in Bank of America Corporation in 2011 and has raised its stake ever since. The company’s total cost base was $14.6 billion then, which has now doubled in its value as the hedge fund owned a BAC stake worth over $31.4 billion in Q2 2022. The financial services company was the second-largest holding of the fund and represented 10.47% of Warren Buffett’s portfolio.
On July 20, Bank of America Corporation hiked its quarterly dividend by 5% to $0.22 per share. This marked the company’s 9th consecutive year of dividend growth. As of August 17, the stock’s dividend yield came in at 2.43%.
In July, Societe Generale upgraded Bank of America Corporation to Buy with a $37.5 price target, highlighting the company’s loan portfolio and sensitivity to rising interest rates.
At the end of Q1 2022, 99 hedge funds in Insider Monkey’s database owned stakes in Bank of America Corporation, up from 84 in the previous quarter. These stakes are collectively valued at over $45.4 billion.
Miller Value Partners mentioned Bank of America Corporation in its Q1 2022 investor letter. Here is what the firm has to say:
“There are many times when volatility and beta give false signals. Banks outperformed in the post-tech bubble bear market of the early 2000s. At the market peak prior to the financial crisis (when risk was the highest in those names!), Bank of America (NYSE:BAC) had a 0.9x beta (based on the trailing 5 years) suggesting its “risk” was below the market’s. Wrong! It massively underperformed in the financial crisis. Realized beta over the 5 years from the pre-crisis’ 2006 peak measured 2.3x.
A much better indicator of actual risk, both before and after the financial crisis, was the quality of the balance sheet and risk-taking appetite. Beta is backwards looking and non-stationary. Relying on it underestimated risk going into the financial crisis and overestimated coming out of it (its beta has continued to fall over the past decade).
We care greatly about risk. We spend a significant amount of time thinking about the risks to our investments. We measure risk as permanent impairment of capital, which means the prices and values don’t bounce back. Business fundamentals determine risk.”
1. Apple Inc. (NASDAQ:AAPL)
Berkshire Hathaway’s Stake Value: $122,337,373,000
Dividend Yield as of August 17: 0.53%
Apple Inc. was the largest holding of Berkshire Hathaway in Q2 2022, as the hedge fund owned over 894 million shares in the tech company, valued at $122.3 billion. The hedge fund started building its position in the company in 2016 and since then Buffett’s bet has soared to over $160 billion. At the end of Q2, the company represented 40.7% of Warren Buffett’s portfolio.
Apple Inc. pays a quarterly dividend of $0.23 per share, with a dividend yield of 0.53%, as recorded on August 17. The company maintains a 9-year track record of consistent dividend growth.
In August, Wedbush raised its price target on Apple Inc. to $220 and maintained an Outperform rating on the shares.
At the end of Q1 2022, 131 hedge funds in Insider Monkey’s database owned stakes in Apple Inc., down from 134 a quarter earlier. The total value of these stakes is over $182 billion.
Wedgewood Partners mentioned Apple Inc. in its recently-published Q2 2022 investor letter. Here is what the firm has to say:
“Apple grew revenues +9%, driven by +17% growth in the Services segment. While iPhone revenues grew a modest +5%, it was on an exceptional year ago comparison of +66%. iPhone continues to capture most industry smartphone profits by focusing on high-end price tiers. Apple is taking nearly two-thirds of the revenue share in the premium ($400 and above) smartphone segment. Further, most of the growth was driven by expansion in the “ultra-premium” price tier of $1000 or more per unit.[1] As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.
You can also take a look at 10 Important Dividend Increases to Watch in August and 10 Best Blue Chip Dividend Stocks to Buy in August
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This article is originally published at Insider Monkey.
